A cohort study was designed to assess the impact of mass distribution of azithromycin (MDA) for trachoma control on incidence over six months of pediatric diarrhea in eight communities in rural Tanzania. A single dose of azithromycin was offered to all residents in four communities, where trachoma prevalence was ≥ 10%. Four geographically matched communities had trachoma prevalences < 10% and did not receive MDA. All randomly selected children (n = 1036) were followed-up for six months post-MDA with bi-weekly surveillance at home. In the 0–1-month and 1–3-month periods, MDA exposure was associated with a 39% (rate ratio = 0.61, 95% confidence interval = 0.39–0.95) and 24% (rate ratio = 0.76, 95% confidence interval = 0.54–1.07) lower risk of diarrhea, respectively, compared with those unexposed, after adjustment for clustering and covariates. By the 3–6-month period, diarrhea incidence was comparable between groups. Thus, MDA was associated with a short-term reduction in diarrheal morbidity in children.